Expectations Investing

For example, large-volume purchasers such as The Home Depot,

General Motors, and McDonald’s use their bargaining power to obtain

favorable prices from their suppliers. Large companies also enjoy

economies of scale in advertising because higher volume enables them

not only to negotiate lower prices but also to reach more potential cus-

tomers. These economies give larger companies a cost advantage over

smaller competitors; if large enough, they can deter new competitors

from entering the marketplace.

But the simple pursuit of market share and scale is no panacea, as

Adrian Slywotzky and Joao Baptista warn. For example, Southwest Air-

lines and steel produc ...